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Indian manufacturing activity continued to grow in February helped by a rebound in export demand.

The Nikkei-Markit India purchasing managers’ index rose for a second consecutive month in February to 50.7, up from 50.4 and holding above the 50-point mark separating expansion from contraction.

The survey found evidence of intensifying inflationary pressures as input costs rose at the fastest pace since August 2014, with goods producers reporting higher costs for metals, energy, chemicals and plastics. Output charge inflation also rose to a 40-month high.

Pollyanna De Lima, economist at IHS Markit said companies remained wary of the strength of the recovery following a hit to December figures following a round of demonetisation in India. De Lima added:

Of concern, higher commodity prices resulted in increased cost burdens facing manufacturers. The sharp rate of inflation seen in February was the most pronounced in two-and-a-half years and led factory charges to be raised at the quickest pace in 40 months. This is likely to cause demand from price-sensitive consumers to fall and could potentially jeopardise the economic recovery

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